Yet Another Bubble 2.0 Thread

I see a lot of optimistic people here who are saying there is no bubble brewing and that prices will keep appreciating.

Here are my questions to you:

1. Do you own a home in Bay Area?

2. If the feds are promissing low interest rates until 2015, would that be music to investors' ears? If I'm an investor, I'd buy now and sell in mid 2014. The fed is basically telling everyone when the bubble will start bursting - 2015.

3. There are many great tech companies here. Many startups. People want to live here. All true. Then why are there incredible shortages in areas and cities and states without a Silicon Valley? Areas like Phoenix, Portland, DC, Florida - those cities don't have a Silicon Valley to sustain. Why are their inventories dramatically lower and prices dramatically higher just like Bay Area?

4. There's been speculation that tech companies are far overvalued. For example, a company like Pinterest has no revenue but it's worth 4.6 billion. Call it the Facebook/Google craze and jealousy. Everyone wants to be the next Facebook and Google. Not only are investment firms pouring money into every startup but ordinary people are also pouring money into startups hoping to strike lightning and become Facebook 2.0. Sounds like a bubble to me. Here's news to everyone: if we go into a depression/recession, people and companies can cut back on technology. They will stop buying it period. But we can never cut back on food, water, shelter.

5. Why do people want a "housing recovery"? Recovery to what? 2008 levels? Is that what people really want?

6. Do you honestly think this "recovery" is only in Bay Area? Do a Google search for "housing inventory" and you'll see that this is nation wide - this is NOT only local. Many cities and areas without tech companies have had equally large increases in $/sq ft and equal amount of cash offers.

Here's my take on all of this:

This is not a local event exclusive to Bay Area. Investors are buying in every major city. If there are 30 cash offers, then my guess is that these people are looking for fast profits then dump before the burst. They are not living in all the homes they buy.

While we do have tech companies here to power the local economy, this uptick in pricing is mainly driven by social mood and low interest rates.

We shouldn't cheer for a recovery to 2008 prices. It's insane. It'll just make everything cost more and when the bubble bursts, all the costs and debt will just fall back to you and I. And the only people who profit are the 1%(IE. the all cash buyers).

There is a another tech bubble going on. Trust me. Every investor thinks their startup will make it. But in reality, most tech companies aren't making any profit and likely never will. Every entrepreneur just wants to be bought by Google or Apple. They know they won't ever make any profit. How do I know this? I consulted for many startups. Most of them have NO chance of surviving but have received 1-2 million in funding already.

My advice to those who own homes:

Sell now. Why wouldn't you? If you aren't selling because you think prices will keep ticking up, then sell with a price tag of what you think your house is worth 5 years from now. Shouldn't be much of a problem finding a buyer right? Shouldn't be a problem if you think investors think home prices will appreciate for 10 years.

For those who are looking to buy first time:

I suggest you wait it out and just rent. If it isn't a bubble, just clap your hands for those who had the balls to jump into this market. If it is a bubble, you didn't just lose your life savings. Remember that if this is indeed another bubble, then the economy will likely tank when home values decrease and you are more likely to lose your job. What's worse than see your house lose 100k in value? Losing your job and then losing the entire house. Just rent until 2015.

Re: Yet Another Bubble Question Thread

I predict a correction around that time but not a full scale pop. Prices in my neighborhood went down at the most 25%. I don't even see the prices going t=down that much. The reason is all the homeowners would not want to sell with a mortgage at 3.5%. Inventory will be tight around that time unless we see a recession like the past few years. For current homebuyers I don't see a better situation with slightly lower prices either as higher interest rates would eat into their margins.

I have no answer about other cities. But Bay Area is definitely unique. I've heard anecdotes from friends and relatives who are long time residents here. All they remember about real estate is that it's pricey, difficult to buy and it's unique.

I see very few companies with the shaky foundations of the dot com era that you describe.

Well why won't you want a recovery. I guess it depends on whether you are a buyer or a seller.

Again Bay Area is unique. There's a reason people all over the world flock here.

Here's how I take your advice to sell. I would sell when I'm ready. Not when the market tells me to. I bought a house to live in, to enjoy with friends and family. It is not an investment to me. At this point I do not care if I make a fat profit when I sell or not as long as it's not a loss.

My advice to home buyers is to wait a bit as well. Not for home values to go down, but to find the right house for them. The problem with tell buyers to not buy for some time is they are also staring a higher interest rates in the next few years.

I predict a correction around that time but not a full scale pop. Prices in my neighborhood went down at the most 25%. I don't even see the prices going t=down that much. The reason is all the homeowners would not want to sell with a mortgage at 3.5%. Inventory will be tight around that time unless we see a recession like the past few years. For current homebuyers I don't see a better situation with slightly lower prices either as higher interest rates would eat into their margins.

I have no answer about other cities. But Bay Area is definitely unique. I've heard anecdotes from friends and relatives who are long time residents here. All they remember about real estate is that it's pricey, difficult to buy and it's unique.

I see very few companies with the shaky foundations of the dot com era that you describe.

Well why won't you want a recovery. I guess it depends on whether you are a buyer or a seller.

Again Bay Area is unique. There's a reason people all over the world flock here.

Here's how I take your advice to sell. I would sell when I'm ready. Not when the market tells me to. I bought a house to live in, to enjoy with friends and family. It is not an investment to me. At this point I do not care if I make a fat profit when I sell or not as long as it's not a loss.

My advice to home buyers is to wait a bit as well. Not for home values to go down, but to find the right house for them. The problem with tell buyers to not buy for some time is they are also staring a higher interest rates in the next few years.

1. No I don't own a house...but I'm one of those %#&*## that doubled my money on my last one (when I left that $100 bottle of wine & nice card on the table you'd have thought the buyer would have gone "hmmmmm") and am now renting.

2. Agreed investors will dump in 2014, and as they do more will dump.

3. Because although price ranges might be local...the up/down trends of the RE market isn't local, that's a fairytale folks RE agents like to believe. It is fundamentally affected by national policies such as tax policy, fannie/freddie, interest rates set by the fed, and national "mood". Don't kid yourself...it's not local.

4. Yup there certainly is a strange culture here of companies being started for the sole purpose to be "bought". What ever happened to actually making money?

5. They want a recovery because they bought into the last bubble so they need a new one to get above water and begin using those houses as ATMs again.

6. "Recovery" isn't only in the bay area....it's everywhere...more to my point....the trajectory isn't local at all.

IMHO, the safest strategy right now I think if you are hell bent on buying...is buy something you can live in a LONG time (like kids and wife long), and only if you have a big fat wad for a down. Chances are....if you want to see that fat down again you are going to be living there for a while. Another option...buy a vacation property many prime vacation spots are still in the dumps while metro areas are in a frenzy, this way you have you cash in a hard asset + tax deduction etc.

Since I'm giving out free advice too...good chance there's going to be a stock market crash in 2013-2014 too. But hey I'm sure the stock market is "local" too lols.

Re: Yet Another Bubble Question Thread

Im not speculating on whether there's a bubble or not. What I do know is that the Fed isn't going to raise interest rates until the economy is strong. Much stronger than today which means housing prices will likely be higher when they do.

If you do need to buy a house Im suggesting do it now unless you want to speculate on how much higher prices may go before the "bubble" pops. Usually folks who speculate on housing prices are the ones who end up losing we've been through that before.

The investors I know are not speculating on housing prices.

The other thing about the Fed when they change direction it takes time for the new policy to take hold so when they decide to put on the brakes and raise interest rates to .25% in 2015 it may or may not slow the booming economy. Just like when they lowered interest rates to 0 to stop the decline basically took 4 years or 0 interest rates and 3 rounds of quantitative easing for the new policy to take effect.

So a bird in the hand is worth two in the bush. Speculating on housing prices you may get lucky or maybe not. Most people realize this which is why they're buying now while affordability is at historic levels.

Re: Yet Another Bubble Question Thread

If everyone should rent like the OP says, then it just plays into the investors hands.... There are not enough rentals or for sale housing....Ergo we have a housing shortage.....when all of you Internet geniuses put down your computers and pick up hammers maybe enough housing will be built...Until then hold on to your tin foil hats and watch rents and houses prices skyrocket.

Re: Yet Another Bubble Question Thread

I was a bear in 2000-2009. I have been a bull since then...I don't think skyrocketing prices are a good thing...but then I am not part of the problem. I am a builder....Until building increases a lot, prices will go up, especially in the RBA...whether an individual choose to rent or buy will have no effect on that fact....

The main reason I bought a house a year ago is because bu...

The main reason I bought a house a year ago is because buying was cheaper than renting, much cheaper when you trully account for everything. I'm sure it's still the case with current 10% yoy price increase.

I see a lot of optimistic people here who are saying there is no bubble brewing and that prices will keep appreciating.

If it is a bubble, you didn't just lose your life savings. Remember that if this is indeed another bubble, then the economy will likely tank when home values decrease and you are more likely to lose your job. What's worse than see your house lose 100k in value? Losing your job and then losing the entire house.

This is best! True, 1929 Great Depression made people to live like this!! Perhaps, you would be happy to see this!!!

Any way,my 2 cents, I was so ignorant for first fifteen years - fear of losing job and after effect - not buying home, until I met the lay-off 2001-2003 dot.com bubble. Now, I know the answer and I am not ignorant. You have to find an answer for your fear. My friend bought a home in 1996 for 350k (now rental at $3500/month) and I bought a home few streets away at 780k in 2004 and both are valued at 1.25M (highly cash offer area!). Judge by yourself, who was ignorant!